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Microsoft to pay Nokia over $1 billion in smartphone deal

Microsoft, according to BusinessWeek, will be paying the Finnish company Nokia more than $1 billion in their industry-shaping smartphone deal.

The deal, under which Nokia will use the Windows Phone 7 OS, was seen as a coup for Microsoft, and a potential blunder by Nokia. Nokia has long used its own proprietary software, meaning the partnership was a sea change for the company.

The $1 billion plus dollars will go to “promote and develop Windows-based handsets” by Nokia, according to the report.

This new disclosure of information, coming not from a press release, but through leaks, is surprising. After the deal was announced, speculation ran wild that the agreement would involve several billions of Microsoft dollars being shipped to Nokia. Then comments from Nokia’s CEO seemed to run contrary to the idea.

Now, with this new information, a figure slightly above a single billion dollars seems to be gospel.

The deal itself will involve Nokia paying Microsoft a per-device fee to use the OS, opening a potential rich revenue stream for the Microsoft mobile division for the future. Provided the phones sell, then Microsoft would not only be growing its market share, but also its revenues in a very direct and simple fashion.

With the final figure range revealed, Nokia’s decision to not adopt Google’s Android seems simpler: Windows Phone 7 came with a check.

Of course, Microsoft can afford the billion dollars to grab mobile market share, something that it has been shedding for years. With the Nokia deal, Microsoft has a chance to truly explode its new platform around the world. If it can do so, and regain its position near the top of the smartphone world, the billion dollar pricetag will be seen as a strategic investment and nothing more.

On the other hand, if the Nokia deal goes either south or sideways, Microsoft will have, in effect, ejected a billion greenbacks from its coffers for a nil return.

Whatever the case, with Microsoft’s cash and software, and Nokia’s still massive handset market share, both of the companies are praying for a rebound. If they get it, they will both become richer. If not, Microsoft will survive, but Nokia might be both broken, and broke.